Question

On april 1, santa fe, inc. Paid griffith publishing company $1,548 for 36-month subscriptions to several different magazines. Santa fe debited the prepayment to a prepaid subscriptions account, and the subscriptions started immediately. What amount should appear in the prepaid subscription account for santa fe, inc. After adjustments on december 31 of the first year assuming the company is using a calendar-year reporting period and no previous adjustment has been made

Answer 1

Answer: $1161

Explanation:  Santa fe, inc. Paid Griffith publishing company $1,548 for 36-month subscriptions to several different magazines. Since Santa fe, Inc subscription started at the same moment and the books of accounts shows fiscal year ended 31st December.

Prepaid expenses per month = Subscription amount ÷ Number of months

Prepaid expenses per month = $1548 ÷ 36

Prepaid expenses per month = $43

Since the subscription started immediately in the month of April, for the current year (April - December) 9 months ,

The subscription amount is $43 × 9 = $387

Prepaid subscription carried forward = $1548 - $387

Prepaid subscription carried forward = $1161